Understanding Prosperity Through Scarcity, Price, and Economy
60 minVideo supplements additionally published on PolicyEd.org a product of Hoover Institution, Stanford University. To view them in their original format, click here.
Guiding Questions
- How do prices reflect scarcity?
- How do prices impact prosperity in society?
- How does cooperation help mitigate scarcity?
Objectives
- Students will define: prosperity, supply, demand, law of demand, law of supply, scarcity, shortage, surplus, price ceilings, price floors, equilibrium, market.
- Students will identify how prices serve as a signal in the economy.
- Students will explain how supply and demand reflects the market and determine prices.
- Students will identify how prices affect the availability of goods and services that are a part of their daily lives.
- Students will analyze the impact the government has when setting prices above/below the market equilibrium
Student Resources
- Hoover Institution Videos & Viewing Guides
- 3×5 notecards or scratch paper
- Optional Student Guide
- Glossary
- Background Reading to Hurricane Katrina
- Helpful Weblinks for further research:
Educator Resources
- Prosperity
- Economy
- Law of Supply
- Law of Demand
- Supply
- Demand
- Scarcity
- Shortage
- Surplus
- Price Ceiling
- Price Floor
- Equilibrium
- Market
- Benevolence
Facilitation Notes
- Start with the Hoover videos to give an overview of the included concepts.
- Depending on the level of scaffolding needed for your students, consider distributing the video viewing guides for added support.
- When using the glossary, teachers are free to introduce these terms at a pace they see is appropriate for their students.
- Note, as a society, we do see a general rise in prices – called inflation. This is why we encourage students to use the inflation calculator before talking about factors of supply and demand that change prices.
Anticipate
- Scaffolding Note: Prior to engaging with the videos and other aspects of the lesson, have students review and complete the interactive glossary. Alternatively, focus on a term at a time just before it is introduced. Notes of where in the lesson terms are introduced are provided throughout the lesson plan.
- Optional: Use the following activity if you have not yet defined and discussed Prosperity.
- Have students watch the Prosperity video either independently or as a whole class. Direct student attention to the focus questions: As you watch, think about what prosperity means or looks like to you and how it might be achieved. Students can record notes in their journal, notebook, or online.
- Have students turn to a neighbor and share reflections. As a pair, students decide which focus question and response to share aloud with the class.
- Allow students to share their reflections with the class. Engage in class discussion as time allows.
- Scaffolding notes:
- Glossary term(s): Prosperity
- Use the viewing guides to create checks for understanding. The questions from these guides could be added to a video editing tool such as Playposit or Edpuzzle.
- Have students watch the Prosperity video either independently or as a whole class. Direct student attention to the focus questions: As you watch, think about what prosperity means or looks like to you and how it might be achieved. Students can record notes in their journal, notebook, or online.
Engage
- Write the following quote on the board from Adam Smith’s The Wealth of Nations:
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“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.”
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- Have students read the above quote from Adam Smith. Ask them to consider what the quote means, how it relates to economics, prices, and availability of goods/services, and whether they agree or disagree with Smith’s views on self-interest.
- Label four corners of your classroom as follows: Strongly Agree, Agree, Disagree, and Strongly Disagree. Instruct students to stand and then move to the appropriate corner that represents their belief, in response to Adam Smith’s quote.
- Have some students explain their rationale for their decision. Allow students to move freely between corners, as they hear other students’ reasoning, and explain why they changed their opinion. Engage in class discussion as time allows.
- Scaffolding Note: Before students take a stand, allow them to share their thoughts with a neighbor. This can help students in special populations be more confident in their responses before having to share them with a larger group.
- Transition: Smith’s quote helps us understand that economies don’t just run on people being generous with the goods and services they have. It takes a lot more than that–we have to consider what kinds of goods and services are available, how much they cost, and how those prices can change over time. Let’s consider who controls supply and demand and how prices are impacted. We’re going to watch the following video together. I’ll pause at a few points so we can explore some of the ideas further.
- Play the Economy video from start to the 1:11 mark. Let’s make a list of some of the things you may want to purchase in the near future. How effective would it be for the government to be in charge of deciding what we need or what to produce? Let’s continue watching. Play video from 1:11-2:44. So who does decide what to produce? And what kind of impact do we have on the price of those goods and services? Play video from 2:44-end. What is the appropriate role of the government in the economy?
- Transition: Smith’s quote helps us understand that economies don’t just run on people being generous with the goods and services they have. It takes a lot more than that–we have to consider what kinds of goods and services are available, how much they cost, and how those prices can change over time. Let’s consider who controls supply and demand and how prices are impacted. We’re going to watch the following video together. I’ll pause at a few points so we can explore some of the ideas further.
- Glossary Term(s): Supply, Demand
- Transition: Let’s take a look at how much certain goods and services have cost and how those prices have changed over time. As a society, we do see a general rise in prices – called inflation. Here’s a list of items or services that you and your family might purchase regularly. We’re going to look at how those prices change, even when we account for inflation. Choose two of the following goods or services and research the current price for each, as well as at least three other prices over the last 10 years. Be sure to note if the prices are more expensive or less expensive over time.
- Have students work independently first on their two goods/services.
- Scaffolding Notes:
- Graphing their data points is also a useful visualization for students and helpful in their discussions and comparisons with other students.
- This activity can also be extended or abbreviated as needed and appropriate to your grade level or student needs.
- Expand on the meaning of inflation as needed.
- Milk:
- Eggs:
- Potato chips:
- Gasoline:
- Movie tickets:
- College tuition and fees:
- Motor vehicle insurance:
- Sneakers:
- Apparel:
- Hair cut:
- Allow students time to research and/or graph their data points for their selected goods and services. Once students have completed their independent research, have them find another student who chose different items.
- As a pair, compare the changes in prices of the selected products. What similarities and/or differences do you and your partner see? Brainstorm a list of factors of supply and/or demand that have caused the price changes. Discuss the following questions:
- What price change surprised you the most and why?
- How do these price changes affect your prosperity?
- Pairs of students decide which question and response to share aloud with the class.
- Allow students to share their reflections with the class. Engage in class discussion as time allows.
Explore
- Transition: What causes prices to change? Let’s start with Scarcity. As we watch this video, think about what it means, and what might be some of the negative impacts of scarcity.
- Transition: The case study over Hurricane Katrina we are going to read exemplifies how prices change based on a change in quantity supplied, quantity demanded, and outside factors. As you read I want you to pay attention to the goods and services that were needed during and after the hurricane, how that impacted the supply and demand of those goods and services, and what happened to the prices as well.
- Scaffolding Note: Students might not have a lot of background knowledge on Hurricane Katrina. Consider showing a video or slideshow of images to help contextualize the event for students. Additionally, a cause-and-effect or other graphic organizer might help students process the information.
- Glossary Term(s): Scarcity, Shortage, Supply, Demand
- Distribute the Hurricane Katrina reading to students.
- Allow students time to read the essay either aloud as a class, in small groups, or individually. After reading, give students time to answer and discuss the three concluding questions. Engage in class discussion as time allows.
- Transition: Not only do we have issues such as scarcity at play in the prices of goods and services. We also have other factors that impact prices. We talked already about the role of government in choosing what is produced but now think about the role of the government in regards to prices. As we watch, look for these terms: Price ceiling, price floor, shortage, rent control. What are they and what impact do they have? What is a better way to help decrease prices? Play and pause the Prices video and discuss as needed.
- Let’s run through a few cause-and-effect scenarios. On your handout, you have a few examples of policies that are sometimes used to impact prices. With your partner, think about how each policy affects prices, demand for products, the supply of products, and if it causes a surplus or shortage of products.
- Allow students time to complete the “Cause and Effect” activity with a partner or small group.
Glossary Term(s): Shortage, Surplus, Price Ceiling, Price Floor
Assess & Reflect
- Option 1: Select at least one of the lesson’s guiding questions. Respond to the question(s) in writing or on video. Include a short reflection that includes your rating for how well you understand the lesson concepts.
- Option 2: Apply what you learned from the Hurricane Katrina case study to other product shortages such as during the 2020 COVID-19 pandemic.
- Create a dialogue between a parent and child or grandparent and grandchild comparing the chosen situation to that of Hurricane Katrina. Be sure to include in your dialogue how you would address the problem of product shortages and ways to return product prices to equilibrium.
- Your response can be written or recorded in a video.
Extend
- Scaffolding Note: The following options can be done in class but would need several more days to complete.
- Write a blog post or newspaper article reflecting on the following:
- Research a community changed by a shift in production/demand of a good or service (such as Detroit and the automobile industry, or the textile industry coming back to the southeastern United States from overseas).
- Be sure to include an explanation as to: how prices help move goods and services to where they’re needed most; how societal cooperation can help address prosperity issues; how prices of labor, goods, and services, can change over time.
Student Handouts
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